Israel’s relations with the European Union are “close and friendly” again, Jerusalem said Friday, signaling a receding of tensions that arose last year over the EU decision to label imports from West Bank settlements.

While the labeling directive is not expected to change, Nahshon said Israel received had assurances that the move “is not a political step to determine future borders or to boycott Israel.”

Nahshon told journalists that Mogherini told Netanyahu that the November decision to label settlements goods “does not prejudge the outcome” of the conflict.

“The conversation resolved the tensions and we are, Israel and the EU, back to good and close relations,” Nahshon wrote in an English-language comment on social media.

Netanyahu and Mogherini “agreed that relations between the two sides should be conducted in an atmosphere of confidence and mutual respect… that will assist in advancing the Middle East peace process,” Nahshon said.

Deputy Foreign Minister Tzipi Hotovely gives a press conference on November 3, 2015, in the Lipski plastic factory at the Barkan Industrial Park near the Israeli settlement of Ariel in the West Bank, on the European Union decision to label goods made in Jewish settlements. (Menahem Kahana/AFP)

The EU announced last November it was instructing member states to begin labeling products manufactured by Israeli-owned companies in the West Bank, East Jerusalem and the Golan Heights as made in those areas rather than “Made in Israel.”

Slamming the move as discriminatory, Netanyahu in response ordered government agencies to exclude the EU, a member of the Mideast Quartet of peacemakers, from any Israeli-Palestinian engagement or negotiations efforts.

During her conversation with Netanyahu, Mogherini underscored her opposition to boycott, divestment and sanctions (BDS) efforts to isolate Israel, and said the EU’s new labeling guidelines should not be interpreted as such.

Mogerhini reiterated the EU’s commitment to the two-state solution, and said any final status issues, including borders, should be settled in direct negotiations between Israel and Palestinian negotiators.

The top EU diplomat also expressed the bloc’s solidarity with Israel over the current wave of Palestinian terror attacks targeting Israelis.

According to a report in the Haaretz daily on Wednesday, bilateral talks aimed at healing the diplomatic rift were launched quietly after Netanyahu and Mogherini met at the World Economic Forum in Davos last month.

During an unpublicized visit to Israel last week, Israeli officials told Mogherini’s top policy adviser Helga Schmid that, “the decisions of the foreign ministers’ council of the European Union and the decision to mark [settlement] products were unilateral, and in practice adopted the Palestinian narrative,” an unnamed senior Israeli official told the newspaper. “That’s not how one conducts a respectful dialogue.”

Another unnamed Israeli official was quoted as saying that the EU “is very unhappy that we’ve frozen [all contacts] connected to the peace process. They understand they have to give us something in words and deeds.”

The tension between Israel and the EU has seen the European body’s officials — in particular its Special Representative for the Middle East Peace Process Fernando Gentilini — all but absent from discussion with the Quartet and other forums.

After meeting in Munich on Friday with fellow members of the international Middle East peacemaking Quartet, Mogherini said the group planned to draft “a report on the situation on the ground”.

“We want it to be not only a report on the state of play, but with recommendations,” for progress toward establishing an independent Palestinian state alongside Israel, she told journalists.

She would also speak later Friday with Palestinian president Mahmoud Abbas, she said, “to make clear that the international community will not give up on the two-state solution.”

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